Big Boxes Not Always The Best Gift

The Trouble Is, The Category Killers Are Killing Each Other. Retail Analysts Say The Countryside Is Littered With Empty Space.

December 24, 1995|By John Handley, Tribune Staff Writer.

'Twas the night before Christmas, and all through the store, the last-minute shoppers scurried for the door.

With their plastic maxed out and wallets very thin, they headed home to spend time with their kin.

Many presents still had to be wrapped--toys, a computer, big-screen TV. All the goodies bought during the annual Yultide spending spree.

Yet the multitude was of good cheer, for the first installment payments weren't due until well into the new year . . .

It's Christmas Eve, 1995, a time for peace on earth.

For the retail world, though, this is just a lull in the battle.

The heavy barrage of holiday hype that was fired during the last two months--when some stores capture between 30 and 50 percent of annual profits--has quieted.

In the hours ahead, children are eagerly awaiting a visit from Santa. But retailers already know how full their stockings have been filled. From most reports, the news is not good. Too many shoppers adopted a Scrooge-like attitude.

In the year ahead, retail competition promises to be even more intense, especially among "big box" stores, those cavernous bazaars that offer the promise of retail goods at wholesale prices.

Arthur Bobis, president of the Steel Products Division of R.H.C. Spacemaster, described the dominance of the big box stores: "They have the power to wipe out neighborhood stores. A single store can't afford the advertising of the big chains. These huge, high cubes are packed with a total selection of merchandise--in every size, every color, every type."

Frequently, these big boxes are called "category killers" because they specialize in one category of merchandise that kills the competition.

Trouble is, the category killers are killing each other.

Economic Darwinism--the survival of the fittest--is at work in the retail marketplace, according to Edward Zifkin, vice president and director of retail brokerage for Hiffman Shaffer Associates Inc.

And while that may be to the ultimate benefit of consumers, who theoretically should reap better service and greater selection at lower prices, it's not doing much for the stores themselves.

"In each category of merchandise there are only so many consumer dollars that are spent. That means that only two or three chains will survive in each category," Zifkin said.

And empty space is on the rise. Vacant big box space in the Chicago area now totals more than 12 million square feet. That compares to upwards of 6 million square feet of vacant space in 1994 and more than 3 million square feet in 1993, according to Zifkin.

"The countryside is littered with empty space," said Jeffrey Howard, senior vice president of the Grubb & Ellis retail division in Rosemont.

"Many of the (vacant) sites once housed a veritable Who's Who of retail giants that are relocating to larger facilities or going bankrupt," said David Bossy, principal of Mid-America Real Estate Corp.

But Mid-America offers a less gloomy assessment of big boxes overall: it measures 8.4 million square feet of big box retail space available at 160 locations in the Chicago area.

Grubb & Ellis maintains there is an oversupply of retail here, and "several major retailers will file for bankruptcy protection and numerous retail properties will be foreclosed in the next two years."

"The ones that will survive are those stores that are more service-oriented and have more merchandise that is presented better," said Dick Totaro, senior vice president and retail specialist with CB Commercial Real Estate Group.

Donald Schoenheider, a principal in Trammell Crow Co., noted that intense competition has led some retailers to downsize or leave a market entirely.

He cited Kmart as one chain that is downsizing across the country.

Howard of Grubb & Ellis said many Kmart stores are too old and too small by today's standards.